Blackstone’s GSO Preparing $1 Billion Financing DealDevin Banerjee
Blackstone Group LP is preparing to announce its largest-ever credit deal, with more than $1 billion of fund commitments, an executive said today.
The agreement, which the firm expects will be announced as soon as today, finances an acquisition for a North American company, Bennett Goodman, the head of Blackstone’s credit business, said at the firm’s fourth investor day in New York. The commitment spans three Blackstone funds, he said without identifying the company.
The acquirer is an existing client of Blackstone’s credit business, known as GSO, which lent $100 million to $125 million to the company about two years ago, Goodman said. It’s seeking financing for an acquisition that will make it a “global player” in its industry, he said.
Amaya Gaming Group Inc., a maker of gambling equipment and systems, is near an agreement to buy the parent of PokerStars, the world’s biggest poker website, according to a person with knowledge of the process. GSO, which provided as much as $160 million in credit to an Amaya subsidiary in December, is backing the PokerStars acquisition with more than $1 billion of debt, said the person, who requested anonymity because the talks aren’t public.
Trading in Amaya was halted in Toronto today after surging 29 percent in two days. Tim Foran, a spokesman for Amaya, declined to comment in an e-mail yesterday, citing company policy not to comment on rumors or speculation. Eric Hollreiser, a spokesman for PokerStars, and Blackstone spokeswoman Christine Anderson declined to comment.
The deal would involve purchasing PokerStars’ parent, Rational Group Ltd., which is based in the Isle of Man, the person said. Amaya is based in Pointe-Claire, Quebec.
GSO has almost tripled assets under management to $66 billion since 2008, when New York-based Blackstone acquired the business. The unit is considering investing in corporate debt in emerging markets and is seeking ways to lend to mid-sized companies in Europe using a structure similar to a business development company vehicle, or BDC, said Goodman.
Goodman said rising markets in the U.S. are limiting opportunities to invest in distressed debt, and investor appetite for yield is driving up prices for assets. Global corporate defaults fell to 66 last year from a peak of 266 in 2009, according to data from Moody’s Investors Service. A Bank of America Merrill Lynch index of U.S. high-yield bonds shows the debt trading at an average of 105.7 cents on the dollar as of yesterday, almost double the low from late-2008.
“We would describe the public markets for high-yield bonds as frothy,” Goodman, 57, said. “We are definitely rooting for a correction, a recalibration of risk.”
Goodman started GSO in 2005 with Tripp Smith and Doug Ostrover. The three became senior managing directors at Blackstone in the 2008 acquisition.
Oaktree Capital Group LLC, the world’s biggest distressed investor, recently cut the $3 billion goal on its next control investing fund by about 40 percent as it struggles to find deals amid an economic recovery, according to three people with knowledge of the matter.
Given the lack of traditional distressed opportunities, Oaktree is spending more time on European nonperforming loans, shipping, commercial real estate and energy, Ronald Beck, a managing director at the Los Angeles-based firm, said on a panel at the SuperReturn U.S. conference in Boston this week. He cited anemic default rates and high-yield bonds that are trading above par.
(An earlier version of this story corrected the location of Amaya’s headquarters.)
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